The Curious Factor: Republicans, Once Obsessed With The Nation's Deficit Have Now Forgotten All About It September 24, 2017

Opinion
By Robert Reich

(BERKELEY,
CA.) -- When
Barack Obama was president, congressional Republicans were deficit
hawks. They opposed almost everything Obama wanted to do by arguing
it would increase the federal budget deficit.

But
now that Republicans are
planning giant tax cuts for corporations and the wealthy, they’ve
stopped worrying about deficits.

Senate
Republicans have
agreed to cut taxes by $1.5
trillion over the next decade, which means giant budget
deficits.

Unless
Republicans want to
cut Social Security, Medicare, and defense, that is. Even if
Republicans eliminated everything else in the
federal budget –
from education to Meals on Wheels – they wouldn’t have
nearly enough to pay for tax cuts of the magnitude Republicans are
now touting.

But
Republicans won’t
cut Social Security or Medicare because the programs are
overwhelmingly popular. And rather than cut defense, Senate
Republicans want to increase defense spending by a whopping $80
billion (enough to
fund free public higher education that Bernie Sanders
proposed in
last year’s Democratic primary, which deficit hawks in both
parties mocked as being ridiculously expensive).

There’s
also the
cleanup from Hurricanes Harvey and Irma, estimated to be least
$190 billion. And Trump’s “wall” – which
the Department of Homeland Security estimates will cost about $22
billion.

Oh,
and don’t forget
infrastructure. It’s just about the only major spending bill
that could be passed by bipartisan majorities in both houses. Given
the state of the nation’s highways, byways, public transit,
water treatment facilities, and sewers, it’s desperately
needed. Trump campaigned on spending $1 trillion on it.

So
how do Republicans propose
to pay for any of this, and a big tax cut for
corporations and
the wealthy – without exploding the federal deficit?

The
usual GOP pretend
game about tax cuts

Easy.
Just pretend the tax
cuts will cause the economy to grow so fast –
3 percent a year on average – that they’ll pay for
themselves, and the benefits will trickle down to everyone else.

If
you believe this, I have
several past Republican budgets to sell you, extending all the way
back to Ronald Reagan’s magic asterisks.

The
Congressional Budget
Office and the Joint Committee on Taxation don’t believe it.
They realistically assume that the economy
won’t grow over 2 percent a year on average over the next
decade.

The
Federal Reserve estimates
the fastest sustainable rate of economic growth will be 1.8
percent, given how slowly America’s working-age population
is growing as well as the slow rate of productivity gains.

But
Trump has already made a
fetish out of discrediting anyone that comes up with facts he doesn’t
like, and other Republicans seem ready to join him.

Senator
Bob Corker, a
Tennessee Republican who sits on the budget committee, says he
doesn’t want to rely on estimates coming from economists at the
CBO and the Joint Tax Committee.

He’d
rather rely on
supply-side economists outside government. “I do think it is
time for us to have a real debate and to have real economists
weighing in and we should take other things into account other than
Joint Tax and C.B.O,” Corker said
last week.

Unfortunately
for the
Republican tax cutters who used to be deficit hawks, we already have
real-world historical evidence of what happens after massive tax
cuts. Ronald Reagan and George W. Bush both cut taxes on the wealthy
and ended up with huge
budget deficits.

Overtaxed? Not even
close

Besides,
there’s no
reason to cut taxes on big corporations and the wealthy. If anything,
their taxes should be raised.

Trump
says we’re “the
highest taxed nation in the world.” Rubbish. The most
meaningful measure is taxes paid as a percentage of GDP. On this
score, the United States has the 4th
lowest taxes of any major economy. (Only South Korea, Chile,
and
Mexico ranking lower.)

American
corporations aren’t
overtaxed. After taking deductions and tax credits, the typical U.S.
corporation today pays an effective tax rate of 24
percent. That’s only a tad higher than the average of
21 percent among advanced nations.

The
rich aren’t
overtaxed. The wealthiest 1 percent in the U.S. pay the lowest taxes
as a percent of their income and total wealth of the top 1 percent
in any major country – and far lower than they paid in the
U.S. during the first three decades after World War II, when the
American economy grew faster than it’s been growing since the
Reagan tax cuts.

But
we do have a deficit in
public investment – especially in education and infrastructure.
And we do have a national debt that topped $20 trillion this year and
is expected to grow by an additional $10 trillion over the next
decade.

What’s
the answer?
Raise taxes on big corporations and the wealthy. That’s what
rational politicians would do if they weren’t in the pockets of
big corporations and the wealthy.

_______________________________

ROBERT
B. REICH is the Chancellor’s Professor of Public Policy at the
University of California, Berkeley, and a senior fellow at the Blum
Center for Developing Economies.

He
served as secretary of labor in the Clinton administration and Time
magazine named him one of the 10 most effective cabinet secretaries
of the 20th century.

Mr.
Reich has written 14 books, including the best-sellers Aftershock,
The Work of Nations, Beyond Outrage and most recently Saving
Capitalism.

He
is also a founding editor of The American Prospect
magazine,
chairman of Common Cause, a member of the American Academy of Arts
and Sciences and co-creator of the award-winning documentary
INEQUALITY FOR ALL.